Is the central bank preparing a replacement for Bitcoin?

Jerome Powell Photo: Federal Reserve

Will the US issue virtual currency in the near future? probably not. But it’s important to know: the plan is really on the table.

Already at a hearing in the U.S. Senate in 2017 approving the appointment of Jerome Powell as chairman of the central bank, Powell then said in response to a question posed to him that “cryptocurrencies are something we follow very closely,” he said, at some point in their trading cycles. “Might be significant” in terms of monetary policy, but stressed that this is not yet the case. What has changed in the last four years? Lots.

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But Powell, did not change his position polarly. He still believes that Bitcoin is a volatile asset and not a currency that is a substitute for the dollar. If anything, Bitcoin is a substitute for gold. The chairman of the Fed made the remarks at a discussion on digital banking, quoted in Calcalist.

Cryptocurrencies remain an unstable asset and the central bank is in no hurry to introduce its own competing currency, Calcalist reported from the virtual discussion on digital banking initiated by the Bank for International Settlements. “They are highly volatile and therefore not really an asset that preserves value – and they are not backed by anyone,” said the Fed chairman.

When asked to define it, Powell said that “this is a more speculative asset that more represents a substitute for gold than for the dollar.”

The report states that in recent years the Fed has been working on developing its own payment system, with the intention of creating an option for faster money transfers. It is estimated that the final product will be unveiled in the next two years.

Calcalist also reported that the Fed is also examining the issue of crypto and that the Boston branch has also entered into a joint project with MIT, of a multi-year study – the researchers are examining the feasibility of developing cryptocurrency by the bank, and that it is estimated that the study will only publish In two or three years.

At the end of the debate, Powell stressed that the central bank is in no hurry to go anywhere – and that in any case any decision will first require the approval and legislation of Congress. “To move forward we need to get the feedback of Congress, of the administration, of large sections of the public. We did not even start working on it in front of the public. “So you can expect any progress in digital currency development to be made with caution and transparency,” the chairman said.

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That is, meanwhile, the Fed has not made a decision to issue a sovereign digital currency. By the way, similar things were also said at the IMF conference by Powell.

In 2017, the president of the Federal Reserve Bank of New York, William Dudley, said: “I would have been pretty careful about Bitcoin. I think it is not a stable place to keep value. At this point, I’m pretty skeptical about Bitcoin. I think it’s more of a speculative activity.

These thoughts will probably accompany us for some time to come, but it can already be estimated with certainty that the day will not be far off and we will hear about a central, stable and well-established virtual currency that could make all Bitcoin investors dizzy when it conquers the market.